EdExcel Economics Unit 3 Micro - 16 Mark Data Question
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This presentation looks at a sample unit 3 question KAA 8 marks Evaluation 8 marks 3 KAA points – define, apply, explain (use diagram) 3 Evaluation points – apply, explain to support Question normally says ”assess” – but it will always require you to use evaluation + a suitable analysis diagram Some questions will require specific use of game theory as part of the answer
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1. The economic cycle refers to short-run fluctuations in national output (real GDP) around its long-term trend. It includes periods of boom, slowdown, recession, and recovery.
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This document defines oligopoly and key aspects of oligopolistic markets. It notes that oligopoly is characterized by a high concentration ratio of the top firms controlling over 60% of the market, branded products, and significant barriers to entry that allow long-run supernormal profits. It emphasizes that in oligopoly, firms' decisions are interdependent and uncertain since each firm is aware of and influences its competitors. Non-price competition through factors like innovation, quality, and customer service is particularly important in oligopoly due to price stickiness near marginal cost.
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FellowBuddy.com is an innovative platform that brings students together to share notes, exam papers, study guides, project reports and presentation for upcoming exams.
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Benefits:-
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Our Belief – “The great breakthrough in your life comes when you realize it, that you can learn anything you need to learn; to accomplish any goal that you have set for yourself. This means there are no limits on what you can be, have or do.”
Like Us - https://www.facebook.com/FellowBuddycom
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This document discusses how supply and demand interact in a market when demand increases or decreases. When demand increases, the demand curve shifts to the right, creating a shortage at the original price. The price rises until quantity demanded and supplied are equal again, eliminating the shortage. When demand decreases, the demand curve shifts left, creating a surplus. The price falls until quantity demanded again equals quantity supplied. In both cases, the invisible hand of the market works through price adjustments to clear the market.
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1. A highly capable brick and mortar electronics retailer with a l.docx
1. A highly capable brick and mortar electronics retailer with a loyal regional customer base (such as Fry's) should adopt which of the following medium term strategies?
"50% off" sale every month
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Niche or harvest
Invest in R&D
2. Amazon's strategy involves offering expanded variety but at very competitive prices. This is primarily achieved through
Economies of scope
Focus on international markets
Economies of scale
Innovative products
3. Uber is an example of industry chaining in which of the following ways?
Economies of scale for service providers
Economies of scope for customers
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Lower wages for service providers and lower prices for customers
4. Shareholder returns are primarily derived from
Growth in share value and dividend payments
dividend payments only
Growth in company profits
Growth in the share value only
5. Strategy is defined best as:
A unique value proposition supported by sound financial decisions
A unique value proposition supported by synergies in operations
A unique value proposition supported by aggressive marketing
A unique value proposition supported by a complex supply chain
6. The cost of attracting new customers is the highest with which of the following groups?
Early adopters
Late majority
Laggards
Innovators
7. In the context of the Differentiation (Quality) vs Efficiency trade-off curve, the efficient frontier refers to:
The company that provides maximum quality for a given cost
The company that provides minimum cost
The company that provides maximum quality
The company that maximizes efficiency
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Customer segmentation
Product development
Market penetration
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Increased technology investment
Acquiring real-estate in an urban location of demand
Increased divident payments for two years in a row
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License its innovation from other laboratories
An independent venture
Smaller scale effort
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Innovation
Efficiency
Quality
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Many companies compete for early advantage in an emerging industry
13. If the willingness to pay of .
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Divest
Niche or harvest
Invest in R&D
2. Amazon's strategy involves offering expanded variety but at very competitive prices. This is primarily achieved through
Economies of scope
Focus on international markets
Economies of scale
Innovative products
3. Uber is an example of industry chaining in which of the following ways?
Economies of scale for service providers
Economies of scope for customers
Improving access and reduced search costs for customers and service providers
Lower wages for service providers and lower prices for customers
4. Shareholder returns are primarily derived from
Growth in share value and dividend payments
dividend payments only
Growth in company profits
Growth in the share value only
5. Strategy is defined best as:
A unique value proposition supported by sound financial decisions
A unique value proposition supported by synergies in operations
A unique value proposition supported by aggressive marketing
A unique value proposition supported by a complex supply chain
6. The cost of attracting new customers is the highest with which of the following groups?
Early adopters
Late majority
Laggards
Innovators
7. In the context of the Differentiation (Quality) vs Efficiency trade-off curve, the efficient frontier refers to:
The company that provides maximum quality for a given cost
The company that provides minimum cost
The company that provides maximum quality
The company that maximizes efficiency
8. Nike hiring sports stars to be brand ambassadors is an example of which of the following mechanisms?
Market development
Customer segmentation
Product development
Market penetration
9. Which of the following is an indication of strategic committment of a company in an industry
Lowering wages of the workforce
Increased technology investment
Acquiring real-estate in an urban location of demand
Increased divident payments for two years in a row
10. A pharma company with a deep roster of capable engineers and scientists and that is the market leader is best advised to begin development of a new drug as:
A partnership with smaller competitors
License its innovation from other laboratories
An independent venture
Smaller scale effort
11. The most valuable competency in the declining phase of an industry is:
Resposiveness
Innovation
Efficiency
Quality
12. There is often limited capacity relative to demand in the early growth period of an industry because:
Capacity is very expensive in the later stages of an industry
Only few companies have products or technologies in a budding industry
Prices tend to be low in the embryonic stage
Many companies compete for early advantage in an emerging industry
13. If the willingness to pay of ...
Economies and Diseconomies of Scale
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Identify economies and diseconomies of scale.
Students must be able to distinguish and give examples of internal and external economies and diseconomies of scale.
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Contestable markets new
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EdExcel Economics Unit 3 Micro - 16 Mark Data Question
- 1. Unit 3 Micro 16 Mark Questions – Exam Advice Takeovers and Economic Efficiency
- 2. 16 Mark Unit 3 Data Question • KAA 8 marks • Evaluation 8 marks • 3 KAA points – define, apply, explain (use diagram) • 3 Evaluation points – apply, explain to support • Question normally says ”assess” – but it will always require you to use evaluation + a suitable analysis diagram • Some questions will require specific use of game theory as part of the answer
- 3. “Assess whether a takeover is likely to increase economic efficiency. Use an industry of your choice” (16 marks) • Define economic efficiency • Allocative (price relative to marginal cost) • Productive (unit cost of production in long run) • Dynamic (pace of innovation, product quality, choice) • Application – takeovers in industry of your choice • Brewing - AB InBev's £71bn bid for SABMiller • Hotels - Marriott spending $12bn to buy Sheraton hotels • Betting - Betfair and Paddy Power • Distinction can be made between takeovers involving horizontal and vertical integration • Vertical takeovers – e.g. Apple buys Star Wars motion- capture company Faceshift
- 4. • Use a relevant diagram to score good KAA marks • E.g. horizontal integration can lead to internal economies of scale (falling long run average costs) Q1 Average Cost (Unit Cost) Output LRAC Q2 Q3 Economies of scale cause AC to fall Lowest point on LRAC is output of productive efficiency
- 5. • Analysis diagram can also support your evaluation • E.g. takeover that increases market power can lead to higher prices for consumers above marginal cost, causing a loss of allocative efficiency and economic welfare. MC Price and Cost Output AC MR1 AR1 P1 Q1 C1
- 6. “Assess whether a takeover is likely to increase economic efficiency. Use an industry of your choice” (16 marks) • Arguments in support 1. Economies of scale from horizontal integration (productive efficiency) 2. Higher supernormal profits leads to increased R&D spending and more innovation (dynamic efficiency) 3. Firms with monopoly power still face competition in contestable markets (allocatively efficient prices)
- 7. “Assess whether a takeover is likely to increase economic efficiency. Use an industry of your choice” (16 marks) • Arguments in support 1. Economies of scale from horizontal integration (productive efficiency) 2. Higher supernormal profits leads to increased R&D spending and more innovation (dynamic efficiency) 3. Firms with monopoly power still face competition in contestable markets (allocatively efficient prices) • Counter-arguments 1. Increased market power can lead to X-inefficiency (managerial slack, waste) 2. Risks of diseconomies of scale (rising long run AC) 3. Many takeovers fail to achieve forecast cost gains 4. Growing number of de- mergers points to limited impact of takeovers on overall economic efficiency
- 8. “Assess whether a takeover is likely to increase economic efficiency. Use an industry of your choice” (16 marks) • Many takeovers driven by managerial motives • Most mergers / takeovers are cleared on competition grounds – but Three-O2 Merger was blocked by European Commission (May 2016) • Market structure following a takeover is less important than the actual behaviour of firms in terms of pricing, non-price competition etc. • Horizontal integration most likely to raise concerns about concentration of market power • But most industries are contestable with the threat of fresh competition + some disruptive entrants
- 9. “Assess whether a takeover is likely to increase economic efficiency. Use an industry of your choice” (16 marks) Takeover / merger Main motives for the transaction Kraft / Cadbury Establish global market leadership in confectionery & access emerging markets (stronger growth potential), strategic fit Google / Motorola Acquire valuable smartphone patents & manufacturing expertise Tata / JLR Economies of scale & acquire expertise, brands, capacity and distribution RBS / ABN-Amro Management vanity and hubris; continue reputation for big deals; over- confidence at the top of a speculative bubble, cheap money Santander / Abbey Market entry (UK) & establish base for further acquisitions to build market share in reformed financial system WM Morrison & Safeway Increase market share & exploit economies of scale to improve competitiveness British Airways / Iberia Consolidation; economies of scale & survival: positioning for further takeovers
- 10. Unit 3 Micro 16 Mark Questions – Exam Advice Takeovers and Economic Efficiency